World chip maker back to work after Chinese plant fire

Bloomberg

Mon, Sep 09, 2013 - Page 15

SK Hynix Inc resumed part operation on Saturday after a fire on Wednesday last week at a Chinese plant that sent prices of memory chips soaring the most in three years on supply concerns.

The world’s second-biggest maker of memory chips is still inspecting a damaged section of the line, the company said yesterday. The blaze occurred during the installation of equipment at the factory, which makes dynamic random-access memory (DRAM) chips used in smartphones and personal computers. Prices for the chips climbed 19 percent as SK Hynix, which supplies nearly one-third of the world’s DRAM chips, suspended operations at the Wuxi plant.

It is not known when the company can resume full production, or how much the delay will affect supplies, said Park Seong-ae, an SK Hynix spokeswoman.

The price of benchmark DDR3 2 gigabit DRAM jumped US$0.30, the biggest increase since September 2010, to US$1.90 on Thursday last week, according to DRAMe-

Xchange, Asia’s largest market for the components. SK Hynix shares fell 3.7 percent to close at 27,100 won in Seoul on Friday last week.

“It’s pretty impactful,” Betsy Van Hees, an analyst for Wedbush Securities in San Francisco, said. “When you’re taking 15 percent of capacity offline, you are going to cause disruption. We were concerned that pricing was going to go down. We think that’s off the table now.”

Chinese mobile phone makers may suffer the most from any shortages because they have been aggressive in price negotiations with chipmakers and have avoided long-term contracts, said Van Hees. Larger companies such as Apple Inc and Samsung Electronics Co will get the chips they need, she said.